Fresh & Easy’s parent company said Wednesday it is abandoning the grocery chain because it didn’t become profitable fast enough and will sell its local locations.
British parent company Tesco PLC launched the chain in California, Nevada and Arizona in 2007, in areas hurt by the subprime mortgage crisis. CEO Philip Clarke said the company invested 1 billion British pounds in capital to build out the stores and a distribution center.
“Faced with the choice of investing further or selling up, we have chosen to sell up and to focus future investment in areas where we can deliver greater returns,” Clarke said on Tesco’s blog.
Fresh & Easy failed to take off in the U.S. because its British parent company didn't do enough to appeal to American consumers, said Darren Tristano, executive vice president of Technomic, a Chicago-based food industry research firm. Tesco tried to apply a business idea that worked in other countries but didn't translate well in the U.S., he added.
Now that the store locations are up for sale, competing grocery chains may want to move in, Tristano said.
“The success and the profitability of those stores may not have been strong, but the opportunity to serve those local markets may still be top of mind for other chains to expand quickly into space that’s readily available for their outlets," he said.
Who might buy the stores?
Tesco said there are already interested buyers, but hasn't named them.
Tristano says Monrovia-based Trader Joe’s could be one potential buyer for some of the stores because they’re about the same size. He added some Fresh & Easy locations are in affluent areas, which could appeal to some independent grocers.
Trader Joe's declined to comment.
Tesco has not released details on store closures or when the sale will happen. Also waiting to see what happens: 5,000 employees working at the Fresh & Easy stores.
"Certainly with the current unemployment situation of today, it would behoove them to begin the process to look for a position at a similar type grocer," Tristano said, who predicts half of the employees will start to look for other jobs.
Tesco's announcement comes as the company profits are shrinking. The company reported a profit of 120 million pounds or $182 million dollars in its fiscal year, down 96 percent from a year earlier. The company said the sale of Fresh & Easy will impact the company's profit by 1.2 billion pounds or $1.8 billion.
Southern Californians who enjoyed shopping at Fresh & Easy, said they were disappointed to see it sold off.
Johanna Arias-Bhatia, who works in administrative hearing for South Central Los Angeles Regional Center, said she would stop by a Fresh & Easy nearby her work for tasty salads that would sell for $7 and up. She was looking forward to going to the Fresh & Easy that was set to open near her home.
Now that the chain is up for sale, she doubts Fresh & Easy will open there.
"I’m sure a lot of people will think, 'What now? Will it remain vacant?" Arias-Bhatia said.
Were you a Fresh & Easy customer? Are you sad the company is selling its stores? Let us know why you liked the store and what you think you'll do now, in the comments section below.
A headline on an earlier version of this story incorrectly characterized Tesco's action with regard to its Southern California stores as "pulling the plug." Here is Tesco's official description of its action: "Our parent company plans to leave the US, [and] we’re pleased to confirm there are no plans to close any portion of Fresh & Easy. While we don’t yet know who our new owner will ultimately be, Tesco announced it has already received interest from a number of parties including groups looking to purchase Fresh & Easy as an operating business." KPCC regrets the error.